Companies hoping to tap the early year thirst for retail flotations have been warned investors are rapidly losing their appetite for the sector.
2014’s bulging pipeline of IPOs was further swelled last week by discount retail chain B&M Bargains announcing its intention to raise £2.5bn via a stock market listing.
However, the discounter’s flotation announcement came in the same week fashion retailer Fat Face pulled its IPO due to unfavourable market conditions and online retailer The Hut ruled out a new listing for the remainder of the year.
One source close to two recent retail floats said: “Institutional investors are beginning to say ‘enough is enough’. They’ve seen so many retail IPOs this year they’re suffering from indigestion.”
Many of those who got their IPOs away earlier in the year have been hit by heavy share price falls.
Poundland shares have fallen 13% since March though are still well above the 300p offer price, while online retailer boohoo.com has seen shares almost halve since the day it started trading, and shares in appliance retailer AO World have fallen over 30% since post-listing highs in February.
This does not necessarily mean companies like B&M will struggle to attract interest, but investors are unlikely to pay the multiples they accepted earlier in the year. “Ultimately it is a pricing issue,” said Clive Baker, MD of corporate advisory firm McQueen. “The market has become increasingly discerning. It will only be the high quality stories that get the high ratings.”